Deutsche Bank and Commerzbank, Banking's Great Comedy Double Act
(Bloomberg Gadfly) -- Things are so bad at Deutsche Bank AG that even Commerzbank AG is starting to look like a better bet. Don't get carried away though.
On Thursday, the lender once lampooned as "Comedy Bank" posted better-than-expected fourth-quarter profit and said it may start paying dividends again for the first time in three years. The shares have risen 14 percent in the past six months, the fourth-best performing stock in the Bloomberg Europe 500 Banks and Financial Services Index.
Meanwhile, Deutsche Bank shares have sunk to their lowest point since its moment of existential crisis in 2016, after it said last week that revenue was at a seven-year low because of struggles at pretty much all of its businesses.
Even though investors seem to put more faith in Commerzbank CEO Martin Zielke than his Deutsche peer John Cryan, the smaller lender can't gloat. One quarter of beating analysts' already low expectations doesn't make a turnaround. Margins are still under pressure and costs are stubbornly high. The bank is depending on growth to offset the squeeze from negative interest rates and competition at home.
Fourth-quarter revenue, which only marginally beat analyst estimates at 2.19 billion euros ($2.7 billion), was lower than the year before. The bank added the smallest number of new retail clients in the quarter since Zielke started his turnaround, making it harder to deliver on his goal of adding 2 million by the end of 2020.
Return on equity remains miserable. It fell to 1.3 percent in the quarter from 2.6 percent year-on-year.
Zielke's dividend promise may offer investors some comfort. But Commerzbank and Deutsche Bank have much in common -- including their unfinished rescue jobs. The top billing at Germany's banking circus is still a double-act.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Edward Evans is a managing editor with Bloomberg Gadfly. He is former managing editor for European finance at Bloomberg News.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net.
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